Executive Control over Public Corporations
✅ Introduction: What Are Public Corporations?
A Public Corporation (also called a public sector undertaking or statutory corporation) is an entity created by the State to carry out commercial or non-commercial activities, typically in public interest.
Created by an Act of Parliament or State Legislature
Has a separate legal personality (like a company)
Owned and funded by the government
Examples: LIC, ONGC, BSNL, FCI, etc.
✅ Meaning of Executive Control
Even though public corporations are statutorily autonomous, the executive (government) exercises control and oversight over them to ensure they act in the public interest and conform to government policy.
This control can be direct (e.g., through appointments or directions) or indirect (e.g., financial accountability, audits).
✅ Types of Executive Control
1. Appointment of Key Officials
Government often appoints the Chairman, Directors, or Managing Directors.
Allows indirect control over policy and decisions.
2. Administrative Directions
The parent ministry may issue policy directions to the corporation under the enabling Act.
Directions must be within the scope of the Act and cannot interfere with day-to-day operations unless allowed.
3. Budgetary & Financial Control
Since funding comes from public exchequer, public corporations are subject to budget approvals, audits, and financial scrutiny by the CAG (Comptroller and Auditor General).
4. Auditing and Reporting
Annual reports and audits are presented before Parliament or State Legislatures.
5. Parliamentary Oversight
Public corporations are accountable to Parliament through Standing Committees like PAC (Public Accounts Committee).
6. Judicial Review
Actions of public corporations can be challenged under Article 226 (writ jurisdiction) if they violate legal or constitutional rights.
✅ Justification for Executive Control
Public corporations handle large public funds
Meant to serve public interest, not purely profit
Require alignment with national policies
To ensure transparency, accountability, and efficiency
✅ Limits on Executive Control
Too much interference can defeat the purpose of autonomy
Political interference may lead to inefficiency or corruption
Courts have held that while control is essential, excessive control undermines autonomy
✅ Important Case Laws (More than Five) with Detailed Explanation
🔹 Case 1: R.D. Shetty v. International Airport Authority of India (1979)
Facts: A government contractor was denied a tender contract even though he fulfilled all conditions. IAAI was a public corporation.
Issue: Whether the IAAI, being a statutory corporation, is bound by Article 14 (equality before law) and administrative law principles.
Judgment: The Supreme Court held that public corporations are “State” under Article 12. Hence, their actions must be fair, reasonable, and non-arbitrary.
Significance: Established that executive control must ensure constitutional values, especially equality and fairness, in the functioning of public corporations.
🔹 Case 2: Ajay Hasia v. Khalid Mujib (1981)
Facts: A student was denied admission by an educational institution registered as a society but heavily controlled by the government.
Issue: Whether the institution is a “State” under Article 12.
Judgment: The Supreme Court laid down tests to determine if a body is an instrumentality or agency of the State:
If government has deep and pervasive control
If it is financially dependent on the government
If it performs governmental functions
Significance: Strengthened the doctrine that executive control can make an entity subject to constitutional obligations, even if legally autonomous.
🔹 Case 3: Zee Telefilms Ltd. v. Union of India (2005)
Facts: The petitioner challenged the BCCI's actions, claiming it was under State control.
Issue: Whether BCCI is “State” under Article 12.
Judgment: Supreme Court held BCCI is not “State” as there is no deep and pervasive executive control.
Significance: Demonstrated that executive control must be substantial to bring an entity under constitutional scrutiny.
🔹 Case 4: Pradeep Kumar Biswas v. Indian Institute of Chemical Biology (2002)
Facts: The question was whether CSIR (Council of Scientific and Industrial Research) is “State” under Article 12.
Judgment: Court said CSIR is “State” due to extensive executive control: appointment of directors, financial dependence, binding directions by the government.
Significance: Clarified how administrative and financial control by the executive converts an entity into “State” for constitutional purposes.
🔹 Case 5: Central Inland Water Transport Corporation Ltd. v. Brojo Nath Ganguly (1986)
Facts: Employees of a public corporation were terminated under a clause that allowed “termination without reason.”
Issue: Whether such a clause in employment is valid for a public corporation.
Judgment: Supreme Court held that such termination clauses are unconscionable and against public policy, especially when applied by State or its agency.
Significance: Reinforced that executive control must ensure fair labor practices in public corporations.
🔹 Case 6: LIC of India v. Consumer Education and Research Centre (1995)
Facts: LIC introduced discriminatory insurance policies that were challenged.
Judgment: Supreme Court said LIC is an instrumentality of the State and must act reasonably, fairly, and in the public interest.
Significance: Executive control must ensure public corporations don’t act arbitrarily, especially when providing services to the public.
🔹 Case 7: Oil and Natural Gas Commission v. Association of Natural Gas Consuming Industries of Gujarat (1990)
Facts: ONGC changed gas pricing policy which was challenged.
Judgment: Supreme Court upheld that as a public corporation, ONGC’s actions must reflect public interest, and executive policy may guide but not compel technical or commercial decisions without reason.
Significance: Shows balance between executive guidance and operational autonomy.
✅ Summary Table of Key Case Law
| Case | Key Principle | Executive Control Insight |
|---|---|---|
| R.D. Shetty (1979) | Public corporations are “State” | Control must ensure fairness |
| Ajay Hasia (1981) | Deep control test | Executive control can trigger constitutional obligations |
| Zee Telefilms (2005) | No deep control = no State | Mere registration not enough |
| Pradeep Biswas (2002) | Financial & admin control matter | Even autonomous bodies may be "State" |
| Brojo Nath Ganguly (1986) | Unfair terms invalid | Control must ensure fair HR practices |
| LIC (1995) | Must act in public interest | Policies under executive oversight |
| ONGC (1990) | Executive policy can guide | Cannot interfere with technical autonomy without reason |
✅ Conclusion
While public corporations are created to be autonomous, their public nature and funding require that the executive exercises control for:
Ensuring accountability
Upholding constitutional principles
Promoting public interest
However, excessive executive interference can:
Undermine efficiency
Politicize decisions
Damage the autonomy essential for independent operation
Hence, courts have constantly maintained a balance — allowing executive control but subjecting it to judicial scrutiny when it goes beyond constitutional or statutory limits.
RELATED Blog
0 comments